In this case the transfer should be completed during the tax year of separation when the no gains / no loss treatment between spouse rule applies. If the shares are to be sold so that a cash sum can be transferred to the former spouse, the shareholder will be liabile for capital gains tax (CGT) on any gains.

If the shares have been held for a long period of time, there could be allowances available to reduce the chargeable gain such as indexation relief, taper relief and the annual personal CGT exemption of £7,700 for the 2002 / 2003 tax year.

If the parties hold un-quoted shares in a family company it may be difficult to sell the shares due to established agreements on the disposal of such shares. Furthermore, it may be difficult to find a buyer for the shares at that time due to the nature of the family business and the general lack of a market for un-quoted shares.


Unit trusts
A unit trust is an open-ended collective investment where the assets of the unit trust are held for the investors by trustees. Unit trusts are open-ended because the number of units in the trust will depend on the daily supply and demand. Unit trusts are collective investments as they allow many investors to 'pool' their money to make a larger fund that is then invested by professional fund managers.

Most unit investment management companies will offer their unit trusts with individual savings accounts (ISA) "wrapper". An investor should always use their annual allowance for ISAs first due to the tax advantages and in particular the fact that ISAs are free of CGT on disposal.

The underlying assets of a unit trust could be fixed interest securities or ordinary shares invested throughout the world. In the UK there are over 1,500 unit trust funds with over 150 investment management companies. Many unit trust funds are general investments with a range of interest bearing securities as well as equities and should be considered as long term investments.

However, there are specialist unit trust funds investing only in say, corporate bonds or a specific sector such as the US, or a particular theme such as bio-technology, and all these funds have different risk and reward profiles. Before making a decision, investors should seek advice from an independent financial adviser (IFA) to determine which fund is most suitable.

On divorce and where ancillary relief proceedings require the parties to transfer unit trusts to the former spouse, the same no gains / no loss treatment between spouse rule applies as with shares. If cash is required and the unit trusts encashed, the individual is liable to CGT on any gains. The gain can be worked out by taking the disposal proceeds and deducting: